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The Client’s Situation
An experienced property developer approached us here at Advocate Finance after completing an impressive new-build, five-bedroom bungalow in Hertfordshire.
The property had been finished to a high specification, with sustainability central to its design. However, the client had reached the end of their existing development finance term before securing a sale.
Their priorities were clear:
- Repay the outstanding development facility in full
- Avoid further extension fees and higher interest costs
- Secure sufficient time to market the property properly and achieve the right sale
The completed property is being marketed with an asking price of £1,385,000
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The Challenge
The existing development facility had reached maturity, and the client had already incurred extension fees after the project overran. Interest was also being charged at more than 1% per month, creating additional pressure on the development’s profitability.
There was no certainty that the existing lender would continue extending the facility. Even if a further extension could be agreed, the associated fees and interest costs would continue to reduce the client’s return.
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Our Solution
After reviewing the various options in the market, Advocate Finance introduced the case to Octane Capital.
Octane’s experience in development exit and sales bridging finance made it well suited to the transaction. Its team quickly understood the client’s objectives and took a pragmatic view of the property, borrower profile and proposed exit strategy.
Octane’s Asset Management team and the independent valuer were both comfortable with the property’s liquidity and the level of demand for comparable homes in the local area.
Working closely with Lee Warne, Business Development Manager, and Andrew Becker, Underwriter, we structured a competitively priced 12-month facility that provided the full amount required to refinance the existing development debt.
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The Result
The independent valuation confirmed a market value of £1.2 million, enabling Octane to provide:
- Net day-one advance: £790,500
- Gross facility: £885,998
- Term: 12 months
- Interest rate: 0.76% per month
- Arrangement fee: 2%, deducted from the gross facility
- Exit strategy: Sale of the completed property
The £790,500 net advance repaid the existing development facility in full.
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Client Benefits
The new facility delivered several important benefits for the client:
- The existing development debt was refinanced in full
- Further extension fees and higher interest charges were avoided
- The client secured a further 12 months to market the property
- The sale timetable was no longer dictated by the maturity of the previous development loan
- The client gained the breathing space needed to pursue the right sale rather than accepting an unnecessarily quick offer
This transaction demonstrates how a well-structured development exit facility can protect a developer’s position after practical completion while providing additional time to realise the value of the finished scheme.
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How can Advocate Finance help?
If your development facility is approaching maturity but you need more time to complete or sell the finished units, Advocate Finance can assess the available options and help you identify a suitable funding solution.
This case study was also mentioned by the Bridging Loan Directory – take a look.
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